Update: The Playboy, Iconix Deal

NEW YORK – Playboy Enterprises Inc (PLA.N) is in preliminary talks to sell itself to Iconix Brand Group (ICON.O), people familiar with the matter said.

At this point, the goal of Iconix, which owns and licenses clothing brands such as Candies, Joe Boxer, and Rocawear, is to bring in a publishing partner to buy Playboy’s namesake magazine while it would keep the brand licensing part of the company, one of the sources said.

Playboy and Iconix declined to comment.

In addition to its well-known magazine, Playboy also has TV operations and a licensing business based on its “Bunny Ears” logo, an image of a rabbit wearing a bowtie.

The sources declined to give further detail and spoke on condition of anonymity because the talks were not made public.

Bloomberg was first to report the story, after which Playboy’s shares rose 41 percent, closing at $4.06 on the New York Stock Exchange.

Based on Wednesday’s closing price, before the stock jumped on news of the talks, Playboy shares had lost about 75 percent of their value over the past two years. Playboy’s market cap was about $100 million based on Wednesday’s closing price.

Playboy has been open to talking to buyers for months, even before the appointment of a new chief executive in June, when Scott Flanders replaced Hefner’s daughter, Christie Hefner.

“It’s difficult to say what the value is on a company that … is losing money,” Nick Gibbons, senior analyst at Gradient Analytics, said.

Playboy magazine’s sales have suffered in recent years as more people get adult entertainment and pictures on the Internet, and as advertising sales have fallen at most mainstream U.S. magazines and newspapers.

“Playboy did generate $250 million in revenue over the last 12 months, so if Iconix applied a 1x multiple to revenues, which I would doubt given that the company is not making money, that would equate to a $250 million purchase price consideration,” Gibbons said.

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